The prosecution today played a secretly taped phone conversation to prove that the main accused in the insider trading case Raj Rajaratnam received tips about lowering of earnings estimate by Akamai Technologies.
"They're gonna guide down. I just got a call from my guy," Danielle Chiesi, a former hedge-fund manager, told Rajaratnam in the call on July 28, 2008. "I played him like a finely tuned piano," said Chiesi, six days before the company made a public announcement.
The prosecution alleged that Chiesi got the insider tips from Kieran Taylor, a former executive in Akamai, a technology firm based in Massachusetts. Chiesi has already pleaded guilty but Taylor has not been charged in the case.
Out of the 26 people arrested in this case, 19 have pleaded guilty. Galleon Group founder 53-year-old Rajaratnam, however, denies any wrongdoing.
If found guilty, he faces up to 20 years in prison. "Hi Dani, I just wanted to thank you," said Rajaratnam in another call on July 30, 2008, shortly after the company announced a lower estimate of revenues and price of stock.
"You did it in such a classy way... the way you worked the relationship," he said. The government also called J Donald Sherman, Akamai's Chief Financial Officer, to testify. The prosecution pointed out that Rajaratnam increased his short position in Akamai from 300,000 to 875,000 shares.
Assistant US Attorney Jonathan Streeter asked Sherman how much of a percentage increase did the hike constitute. "Almost three times," he responded. "Short position" is when a trader borrows shares and then sells them, only to buy them back more cheaply when the price falls.
The profit is the difference between the two prices. Rajaratnam's lawyer argued that their client's trading decisions were based on research and analyst reports, which had also suggested that Akamai would not perform well. John Dowd, a former military lawyer, highlighted several portions of a Goldman Sachs report, which he asserted, reached similar earning estimates as the Akamai insiders. Dowd told the jury that a "conviction sell" from Goldman Sachs, which means that the firm's research expected the company to fall behind, was like a "guide down." "They're a big outfit, aren't they," Dowd asked, referring to Goldman Sachs.
"They're a smart outfit, aren't they?" "They're big," responded Sherman.